Change happens, and it can happen very quickly, often catching the established order unprepared. For traditional retailers, the introduction of e-commerce and the advent of tech enabled giants such as Amazon and eBay completely disrupted the way we select and purchase goods. Those that did not evolve often saw a decline in sales, or worse, were put out of business. Retailers which were forward thinking adapted and developed their online presence to turn what had been a business threat into a commercial opportunity.
The industries – irrespective of sector or geographical location – that navigated disruption were the ones who identified change was happening, accepted it, and evolved at the correct time and pace.
This message formed the basis of a series of Calastone white papers – The Accelerating Power of Technology: Lessons for the Future of Fund Distribution – which analysed how corporates listed on major stock exchanges in the UK, Hong Kong, Singapore, Australia and New Zealand evolved with disruption, and installed leadership, namely CEOs and board directors with an ingrained understanding of technology, data and digital. The paper then assessed how the funds world – whether it be the manager, distributor, platform or transfer agent (TA) – should learn from technologically progressive listed corporates.
For technological change to be meaningful and effective at an organisation, there needs to be a top-down approach whereby the management and board foster a culture that encourages innovation. Companies must therefore embrace technology at every level of their organisation if they are to make effective strategic choices. Calastone research found that businesses that have been at the forefront of technological change and disruption are those that are more likely to have a technologist in a leadership position.
The global research discovered that financial services scored highly in terms of the number of technologists in leadership roles, relative to other sectors. This has clearly had an impact on the banking industry, where retail divisions have made marked progress in developing online and digital functionalities in areas such as payments. Equally, many of the markets analysed by Calastone are developing pioneering fintech hubs.
One interesting anomaly from the Calastone research was the total absence of technologists in board positions in all of the listed corporates across Apac markets. In comparison, four percent of organisations on the FTSE 100 employ a technologist. While the UK leads the way in boardroom technologist representation, it does so from a very low benchmark.
A positive takeaway, however, is that the number of technologists being employed in leadership roles at corporates globally is increasing, again from a small base. As consumer habits evolve and technology matures, Calastone expects the proportion of technologists in leadership roles will dramatically accelerate. The funds world should therefore take note of how listed enterprises are navigating revolutions in technology.
The funds industry is at varying levels of preparedness for technological change. Fund platform Hargreaves Lansdown is one of the only financial services firms in the FTSE 100 to have a technologist on its board, which may help explain why it has taken a lead in its digital strategy, having announced plans to set up a technology hub in 2017.
An absence of senior technologists in leadership positions could spell problems for the funds industry, which is facing considerable upheaval in this low return, high cost market. Disruption frequently occurs in exactly these sorts of conditions, and it is something the funds world needs to be prepared for.
Any number of potential disruptors could upset the status quo in asset management. Changing consumer trends, for example, are helping to drive disruption. Inducement bans under Mifid II may deter ordinary investors from obtaining advice from wealth advisers or IFAs, as they now have to pay for the service. This aversion to paid-for advice will grow because millennials have significantly lower disposable incomes than their predecessors. Cheaper, more efficient alternatives will become more attractive, as evidenced by the growing number of investors constructing their portfolios on mobile applications or robo-advisory platforms.
A disruptor could come in the form of an existing tech giant. Google is known to have conducted research in 2014 on launching an asset management arm, for example. There is, however, industry debate as to whether a tech firm would transition into asset management as some argue regulatory costs and reputational risk concerns may be a major obstacle.
Whatever form disruption will take, by learning from sectors which have made significant strides in evolving with technological advancements, the funds industry will be able to identify a strategic vision and long-term view that will enable it to deal with changing markets and behaviour. Having technologist representation at a senior level has a significant impact on giving firms the ability to cope with change, both within the business itself and among consumers, and build success off the back of it.
(First published in Investment Europe 18/09/17 – http://www.investmenteurope.net/opinion/managing-disruption-leveraging-technologists-at-the-top/)